Financial Accounting Multiple Choice Questions

13. A recommended internal control procedure for taking physical inventories is that the accounting should be done by employees who do not have custodial responsibility for the inventory. This is an example of what type of internal control procedure?
a. Establishment of responsibility
b. Documentation procedure
c. Independent internal verification
d. Segregation of duties

14. The LIFO inventory method assumes that the cost of the latest units purchased are
a. the last to be allocated to cost of goods sold.
b. the first to be allocated to ending inventory.
c. the first to be allocated to cost of goods sold.
d. not allocated to cost of goods sold or ending inventory.

A company just starting business made the following four inventory purchases in June:
June 1 150 units $ 750
June 10 200 units 1,200
June 15 200 units 1,260
June 28 150 units 990
$4,200
A physical count of merchandise inventory on June 30 reveals that there are 250 units on hand.

15. Using the LIFO inventory method, the value of the ending inventory on June 30 is
a. $1,350.
b. $1,620.
c. $2,580.
d. $2,850.

16. Using the FIFO inventory method, the amount allocated to cost of goods sold for June is
a. $1,620.
b. $1,350.
c. $2,580.
d. $2,850.
17. Using the average cost method, the amount allocated to the ending inventory on June 30 is
a. $4,200.
b. $2,700.
c. $1,495.
d. $1,500.

18. Which one of the following is not an objective of a system of internal controls?
a. Safeguard company assets
b. Overstate liabilities in order to be conservative
c. Enhance the accuracy and reliability of accounting records
d. Reduce the risks of errors

19. Internal controls are concerned with
a. only manual systems of accounting.
b. the extent of government regulations.
c. safeguarding assets.
d. preparing income tax returns.

20. Having one person post entries to accounts receivable subsidiary ledger and a different person post to the Accounts Receivable Control account in the general ledger is an example of
a. inadequate internal control.
b. duplication of effort.
c. external verification.
d. segregation of duties.

21. Having one person responsible for the related activities of ordering merchandise, receiving goods, and paying for them
a. increases the potential for errors and fraud.
b. decreases the potential for errors and fraud.
c. is an example of good internal control.
d. is a good example of safeguarding the company's assets.

22. Internal auditors
a. are hired by CPA firms to audit business firms.
b. are employees of the IRS who evaluate the internal controls of companies filing tax returns.
c. evaluate the system of internal controls for the companies that employ them.
d. cannot evaluate the system of internal controls of the company that employs them because they are not independent.

23. Checks received through the mail should
a. immediately be endorsed "For Deposit Only."
b. be sent to the accounts receivable subsidiary ledger clerk for immediate posting to the customer's account.
c. be cashed at the bank as soon as possible.
d. be "rung up" on a cash register immediately.

24. Elkins Company had checks outstanding totaling $5,400 on its June bank reconciliation. In July, Elkins Company issued checks totaling $38,900. The July bank statement shows that $26,300 in checks cleared the bank in July. A check from one of Elkins Company's customers in the amount of $300 was also returned marked "NSF." The amount of outstanding checks on Elkins Company's July bank reconciliation should be
a. $12,600.
b. $18,000.
c. $17,700.
d. $7,200.